Property market extends recovery in Q2

Office leasing, retail activity, and industrial demand improved, whilst luxury home prices stayed resilient.

The real estate market continued to recover in the second quarter of 2026, supported by stronger leasing activity, improving retail sales, higher tourist arrivals, IPO momentum, and firmer investment sentiment.

Grade A office leasing volume rose 23% QoQ to 1.1 million sq ft in Q2, bringing total leasing activity in the first half to 2.1 million sq ft, or 48% of 2025’s full-year figure. Central led activity with 100 leasing deals in H1, its strongest first-half performance since 2019.

Citywide Grade A office net absorption reached 569,600 sq ft in Q2, bringing the H1 total to 945,000 sq ft, a reversal from the negative 88,000 sq. ft. recorded in H1 2025. Vacancy fell for a second straight quarter to 16.2%, whilst overall rents rose 2.0% QoQ and 3.5% year to date.

Retail leasing also strengthened as retail sales grew 8.6% YoY in April and 7.9% YoY in May, marking the 13th consecutive month of expansion. Leasing volume in core districts jumped 55% QoQ to 337,100 sq ft, supported by demand from F&B, fashion, mainland Chinese brands, and cosmetics retailers.

High street shop vacancy in core districts fell to 6.5%, the second-lowest level since Q4 2019. Rents rose 1.0% QoQ, marking the 16th consecutive quarterly increase.

The industrial and logistics sector posted one of the strongest gains. New leasing volume reached 1.6 million sq ft in Q2, up 118% YoY and the highest quarterly level since Q2 2022. Demand was driven by electronics sector expansion and relocations from brownfield sites in the Northern Metropolis.

Warehouse vacancy dropped to 11.6%, but rents fell 2.2% QoQ, marking the 10th consecutive quarterly decline as landlords lowered asking rents to improve occupancy.

Commercial real estate investment volume fell 15% YoY to $8.1b in Q2, but H1 volume rose 50% YoY to $23.1b. Office assets attracted the largest share of capital, whilst student accommodation conversion remained a popular investment theme.

Luxury residential prices remained resilient despite fewer transactions. Prices rose around 2% in Q2 and 3.9% year to date, extending the growth streak to 12 months and lifting prices 10% above the March 2025 trough. However, luxury transaction value fell from $12.56b to $8.76b, whilst the number of deals dropped from 70 to 48.

CBRE expects occupier markets to improve further in the second half of 2026, supported by stronger demand fundamentals and a robust IPO pipeline. Capital market activity is expected to remain selective until financing conditions improve, whilst luxury residential demand is likely to stay resilient due to limited supply.